Archives for September 2013

Physician Dispensed RX’s Larger Than Expected

The astounding statistics on physician dispensed RX’s showed much larger percentages than anticipated. The Workers Compensation Research Institute (WCRI) released a major 24 state report on physician dispensing. There are a few articles on this blog where the WCRI performed individual state studies. Use WCRI in the search box to find them.

The recently released 24 state report produced some very astounding facts that may have flown under the radar for quite some time. Some of the states that are mentioned in this article have actually instituted stricter guidelines on physician dispensed medications.

A few statistics that stood out are:

Maryland, Illinois, Florida and California each had over 40% of the prescriptions filled by a physician.

California, Maryland, Illinois, and Florida all had over 40% of prescription payments made to physicians

Since 2010 the state with the largest reduction in physician dispensing was Georgia with a 7% reduction. Maryland had the highest growth at 4% in the same time period

10% of all Oxycodone was dispensed by physicians in Wisconsin

27% of all ibuprofen was dispensed by physicians in Michigan

Physician dispensing is not allowed in New York, Texas, and Massachusetts

Workers Comp Insurance on Federal Exchanges – A Future Possibility?

Would Workers Comp Insurance work on Federal exchanges? Workers Compensation has followed health insurance with an approximately 10 year lag.

Obamacomp was a term first coined on this blog a few years ago. One has to wonder how much of a stretch it would be to also include WC in the federal insurance exchanges once they are properly established this and next year. Could we be discussing Obamacomp right alongside Obamacare in the near future?

One twist on this would be to have only the medical portion of the claims to be included in some type of medical treatment insurance exchange with the indemnity portion of the claim left to the states to handle. After all, there are already interstate Experience Mod ratings. There are endless variations and possibilities once the state or federal exchanges are working properly.

Would this cause the death of Workers Comp as we know it? That is not a likely possibility, however it could be one of the factors that would cause a very large change in the way that WC is underwritten and handled today.

The House of Representatives has been pushing for a federal insurance license procedure for a few years. The procedure that the House is now considering also includes adjusters and risk managers in its language. Could an agent cherry-pick certain states that were more profitable by having a federal license?

There are so many questions without a good answer yet. Considering the likelihood that changes are coming to most insurance systems is one way to prepare along with being flexible.

Florida Reverses Bad TTD Decision

Florida had previously declared the 104 week cap on Temporary Total Disability (TTD) benefits as unconstitutional. I had even held it up as an example of how a Workers Comp state system can be permanently ruined by such a decision. My earlier article explaining the results if the decision was not corrected can be found here. Nebraska also made a similar decision earlier this year.

The only chance for the awful decision to be overturned was by appealing the decision to a higher court. The 1st District Court of Appeals sitting en banc decided to reverse the earlier panel decision.

The Westphal decision would have cost Florida employers $65 million in additional premiums according to an estimate earlier this year by NCCI. That was a conservative estimate.

One has to remember that insurance carriers have underwritten their insureds based on the current law at the time. Decisions such as this will normally harm a system as carriers have to offset the increases they have to incur by passing it along to employers with higher premiums and cutting the numbers of policies to employers such as trucking or employment agencies.

A great layperson’s attorney viewpoint analysis of the case is here. One of the terms that I find unusual in court decisions is “social legislation” or legislating from the bench. In 1994, North Carolina medical cases going back to 1933 could have been reopened at will due to this type of decision. Many of the large carriers considered pulling out of the state.

Underwriters for insurance carriers have a very difficult task when trying to offset such decisions. The result of this type of decision is the toll ends up being paid by the employer. Congrats to Florida for seeing the light.

6.9% Pure Premium Rate Increase

This was double the expected rate. This came as somewhat of a surprise with the reductions that should have resulted from SB 863. However, SB 863’s effect will take a few more years to be fully realized overall.

Pure premium, also known as loss cost rates, do not necessarily mean that all policies will increase across the board. The deviated rates or loss cost multipliers may be adjusted by each insurance company. As confusing as it may seem, the pure premium rates have little effect if a certain carrier decides to reduce their deviated or loss cost multiplier rates. Insurance carriers are not required to use the pure premium rates.

Deviated rates or loss cost multipliers can vary widely between insurance carriers. For instance in South Carolina, the loss cost multiplier can be from .89 to 2.0. California’s highest multiplier was 2.11 a few years ago.

If this sounds confusing, I would have to agree. The even more confusing rates are when carriers will deviate at different levels on certain classification codes. There are a few carriers that will use the pure premium rates. Those carriers are a rarity.

I think the best way to look at SB 863 is the rates could have increased more without it being in place. Recently, I wrote about the WCIRB removing a certain discount for smaller employers.

Small businesses in CA will feel the impact quite a bit from both developments that will take effect on January 1, 2014. The public hearing for the increase (PDF file) is on September 30th, 2013 in Sacramento. The deadline for written comments is the same date.

Even if your company has no CA interests, the state usually functions as a great bellwether for upcoming developments in other states.

Federalization of Workers Comp Marches On

The National Association of Registered Agents and Brokers Act of 2013 has just been again backed by the US House of Representatives. There are many articles and this blog first had coined the phrase – federalization of Workers Comp which has been picked up by many bloggers – some vehemently against the idea that the Feds are looking to nationalize WC.

I always like to read the bills in their entirety to make sure there is nothing thrown in that has anything to do with the title of the bill. After all, I did read the Obamacare Act from front to back when it was finalized.

The excerpt provided a few concerns and questions. While agencies may need to be multi-state, why is there an inclusion of duties that are not performed by agents and brokers? The bolded text also covers:

There is already a reciprocal agreement between most states for out-of-state adjuster licenses when adjusting files across state lines. I actually possessed eight state licenses a few years ago. As agents/brokers are not really allowed to tender file settlements, one has to wonder what is mean by the below text in bold.

This may never make it out of the House as the bill has been recycled three times before heading to the Senate. I could be over-reading the text. You may want to read the bill or at least the below summary. I will follow this bill and blog on it if there are any changes.

The following is an excerpt of the bill:

Reestablishes the NARAB without contingent conditions as a nonprofit corporation to prescribe, on a multi-state basis, licensing and insurance producer qualification requirements and conditions.

Authorizes NARAB to: (1) establish membership criteria, including a mandatory criminal background check of the producer’s Federal Bureau of Investigation (FBI) identification record for state-licensed insurance producers, and (2) deny membership to a state-licensed insurance producer on the basis of the criminal history information obtained, or where the producer has been subject to certain disciplinary action.

Prohibits NARAB from establishing criteria that unfairly limit the ability of a small insurance producer to become a member of NARAB.

Authorizes the NARAB to establish separate classes of membership and membership criteria, and requires it to do so for business entities.

Authorizes the NARAB to deny membership to any state-licensed insurance producer for failure to meet membership criteria.

States that NARAB membership authorizes an insurance producer to engage in the business of insurance in any state for any lines of insurance specified in the producer’s home state license, including claims adjustments and settlement, risk management, and specified insurance-related consulting activities.

Requires NARAB to: (1) receive and investigate consumer complaints, maintaining a toll-free telephone number; and (2) refer any such complaint to the state insurance regulator.

Authorizes the NARAB to coordinate with state insurance regulators to establish: (1) a central clearinghouse, and (2) a national database for the collection of regulatory information concerning the activities of insurance producers.

PMSI and Progressive Medical Merger Causes Workers Comp Buzz

PMSI and Progressive Medical Merger shows that small WC companies may not exist much longer in the insurance landscape. The buzz at the end of last week and over the weekend was the surprising merger of two Workers Comp service titans.

The merger actually made sense from a financial standpoint as these two companies’ lines of service will complement each other very well.

The WC ancillary service market has long been contracting to a few major players. The buyout and merger fever may just be a premonition of the future.

If one wanted to survey the “new” Workers Comp landscape, they had to look no further than the 2012 LRP Las Vegas conference. Many of the booth workers had commented they were being bought out or had just acquired some type of ancillary service company.

PMSI was one of the WC originals for prescriptions, TENS units (are they still in use?), durable medical equipment, and other related services. PMSI had and has always done a great job of face-to-face marketing.

Progressive Medical seemed to be one of the “late entrants” into the ancillary services market. However, their stellar PBM services were cutting edge at the time. The press release for Progressive Medical can be found here. For convenience the press release on Progressive’s website is presented below.

Progressive Medical and PMSI announced today that the two companies have entered into a definitive agreement to merge. The transaction is expected to close in the fourth quarter subject to receipt of regulatory clearance. The combined company, which will be led by Executive Chairman Eileen Auen from PMSI and Co-CEOs Emry Sisson and Tommy Young from Progressive Medical, will deliver comprehensive workers’ compensation pharmacy benefit management services including end-to-end pharmacy, ancillary and settlement solutions.

“Bringing together the resources and deep industry expertise of these two companies will enable the combined organization to continue to drive product innovation in the workers’ compensation marketplace while delivering operational and service excellence and ever improving clinical and cost containment services to our clients,” said Tommy Young, Co-CEO of Progressive Medical.
Eileen Auen, Chairman and CEO of PMSI, stated “The PMSI leadership team is delighted to partner with Progressive Medical. We will continue to deliver customized solutions to our clients, and I am personally excited about working closely with the combined team to bring unique solutions to our customers.”

“This merger will drive increased efficiency in the workers’ compensation business,” according to Emry Sisson, Co-CEO of Progressive Medical. “We will strategically leverage the capabilities of the combined organization to bring even greater value to our customers.”

Funds managed by Kelso & Company have agreed to acquire a significant ownership stake in
the combined company. StoneRiver Group, the controlling shareholder of Progressive Medical,
will continue to be a significant shareholder in the combined business.

Physician Dispensed RX Extremely Expensive – WCRI

Pennsylvania and Maryland were the subject of two studies by the WCRI (Workers Comp Research Institute) on physician dispensed medication. The same type of study results were released by WCRI on Georgia and Florida earlier this year. All of the study results seem to be very similar.

Even though the studies were for different states, in each of the WCRI studies, the results seem to be the same. Physician dispensed RX’s are extremely expensive.

In an era where employers are more attune to rising WC medical expenses, this is an area where costs could be very easily reduced overall. Maryland and especially Pennsylvania are very expensive states for Workers Compensation coverage.

Physician dispensing seems to add another layer of overtly high costs for medical treatment that basically has no fee schedule.

The two studies by WCRI are best analyzed by examining the price of a very common painkiller – Vicodin. According to the WCRI, the per-pill cost of Vicodin was:

Pennsylvania – From 2008 to 2012 the pharmacy dispensed price was under 40 cents. During the same time span, the price increased for physician dispensed from .80 cents to $1.20. The price increased from double to triple the pharmacy price.

Maryland – From 2008 to 2012, the pharmacy dispensed price per pill was 40 cents. The physician dispensed Vicodin rose from $1.00 to over $1.40. The price now sits at over 300% more per pill which is very similar to Pennsylvania.

The most extreme cost variances between physician dispensed and pharmacy dispensed were:

Over the counter Zantac® in Maryland that was pharmacy dispensed = 35 cents and physician dispensed = $3.40 per pill. This is an almost 1,000% mark up. That is an amazing difference in price on such a popular medication.

Over the counter Prilosec OTC®, costs about $0.67 per pill at Walgreens. However, when Pennsylvania physicians dispensed the drug, they were paid an average of $7.43 per pill. This is an almost 1,000% mark up.

These are both very popular OTC medications that are often used to make drugs such as Vicodin tolerable when ingested.

WCRI’s Executive Director best summed up the comparisons between pharmacy and physician dispensed medications –

“In many states across the country, policymakers are debating whether doctors should be paid significantly more than pharmacies for dispensing the same drug,” said Dr. Richard Victor, WCRI’s executive director. “One question for policymakers is whether the large price difference paid when physicians dispense is justified by the benefits of physician dispensing.”

WCRI has pointed out a great cost-savings measure for TPA’s and insurance carriers. An additional question that has to be asked – Are TPA’s and carriers just passing along this big cost or are they intervening in such a high cost driver? Are PA and MD legislators going to take action as in other states? Time will tell.

Mid State Safety Council

Annual Workshop

Mid State Safety Council October 22, 2013

The North Carolina Mid State Safety Council c/o Mebane Arts and Community Center, 633 Corregidor St., Mebane, NC 27302

The Mid State Safety Council objective is to promote safety in industry, local government as well as home and public places with special emphasis placed upon safety in businesses and organizations. We are designed to be a network for safety-minded professionals, coming together with employee safety as a common goal.

IR is injured reserve. Who would have thought that IR can also mean the team was also admitting that the injury happened due to playing football? NIR is non-injured reserve or the injury sustained by the player is not related to football. This seems to be a modified Workers Comp decision.

This is akin to the “general public exposure” in a Workers Comp defense. This used to and still does make claimants as mad as hornets when this type of denial is/was explained to them.

Mr. Tynes is a tad upset. One of the reasons is that guard Carl Nicks also has the same infection as Tynes. Tynes’s main question is where else would he get it? If you follow the link on MRSA, 30% of the general population has the staph germ in their nostrils.

According to the ESPN article on his MRSA infection, Tampa Bay is basically saying that his current infection is not related to work. Regardless, he is being paid an $840,000 NFL minimum.

This could be easily compared to total temporary benefits in Workers Comp (TTD). His big beef is that he will not be accruing time played in his NFL retirement benefits.

Tynes has filed a grievance with the NFL. One has to wonder if he could also file a WC claim. He may be more likely to win in the Florida workers comp courts.

On a side note, if you are ever in the Tampa Bay area during a Bucs game, it is worth the price of admission. It is more of an event than a regular NFL game.

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About Me

James J Moore
Raleigh, NC, United States

James founded a Workers' Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L's mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers' Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James's educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.